Sterling rises

Sterling rose against the dollar on Friday as investors who had initiated bearish bets squared positions ahead of the weekend, but underperformed the euro, which was buoyed by speculation of greater European Central Bank support to halt the debt crisis.
The euro was broadly higher on the day on growing market talk the ECB may start lending to the International Monetary Fund to bail out troubled eurozone countries, although gains were capped amid widespread anxiety about the debt contagion now engulfing the region's bigger economies. Those concerns are likely to keep the pound supported against the euro as investors seek to exit the eurozone for the relative safety of countries like the UK and the United States.
Sterling was last up 0.2 percent on the day at $1.5787, but off a session high of $1.5888. It has gained for the past two sessions, although for the week it is still 1.8 percent lower. Traders cited stops below $1.5730/40 with near term support at around $1.5715, the 50 percent retracement of sterling's gains from an October 6 low of $1.5266 to a high of $1.6167 on October 31.
"There was pre-weekend squaring in an oversold market which was driving it up along with those headlines about the ECB which pushed the euro higher," said a London based spot trader. "But buying dollars still remains the preferred trade." Traders said sterling was vulnerable against the dollar with investors looking to sell on rallies given a fragile UK economy and the likelihood of further BoE asset purchases.
BoE policymaker Martin Weale said on Friday there was a "very strong case" for extending the central bank's QE programme next year. He also told the Financial Times it was "perfectly possible" that the economy was already contracting. The pound fell against a broadly firmer euro, with the single currency up 0.4 percent at 85.74 pence, pulling away from a recent eight-month low of 84.86 pence. Still, it is on track for its third straight week of losses.